Back To The Future

Forecasting the future with any accuracy is a difficult affair. It is a deductive process first utilizing the facts at hand and then assessing where they will take us and finally, in our business, concluding how the accumulated rationale will affect the various marketplaces. The process is also dynamic, not stagnant, so that new facts, both economic and political, re-engage the outcomes for the future in a myriad of gyrating motions. Being right about the facts, often obscured by various governments, and then correct in your deductions is never enough as macro impacts such as Draghi’s “Save the World” plan can often change the face of market outcomes in a New York minute. This is why so few people can predict the future of the markets with much accuracy. First they fall down in their assessment of the news and accept what is thrown at them as fact. Then they use a flawed deductive process where they try to fit the fact inside their opinions; instead of the other way around. Finally even if you get both the facts and the deductions correctly the markets’ outcomes may be shifted by outside and often unexpected events; not to mention black swans. In other words you must roll with the procession while both the media and sophisticated investors are judging you and holding you accountable by the machinations of your last fight.

“Guitar bands have no future.”

-EMI records, 1962

Over the last ten and one-half years I have stuck my neck out in my commentary. Plenty of opportunities for the guillotine have passed. I point out that I am still here and that some 5,000 large financial institutions in forty-eight countries get “Out of the Box” each day. I have no agendas, hidden or otherwise, and I give you my very best every morning in the hope of helping you protect your assets and so that you can make some money when possible. Long ago I learned that we play to win and not to be right and that being right is only one part of the equation. Each and every moment the past shifts to today, today morphs into tomorrow and the future will determine where we are going whether you wish to acknowledge that reality or not. It is not just a game but the “Great Game” and the winners of yesterday are often the losers of tomorrow and nothing, not one thing, replaces experience. For thirty-eight years of my life I have been engaged and I intend to keep going so keep bringing it all on and I will continue to keep endeavoring to figure it all out.

“If you want to make a Wizard laugh; tell him your future plans.”

-The Wizard

Predictions

The central banks of the world have accumulated balance sheets of about 15 trillion dollars. There will be consequences of this including inflation, valuation of currencies and ultimately defaults as motivated by political and economic decisions. In the spring keep your eye on Greece, Portugal, Spain and Italy as nationalism returns to protect the various nations. The Europeans are not out of the woods and all of their assurances will be for naught. The ECB may well promise to save the Continent but events in April through June will put the promise to the test. The “have nots” can outvote the “haves” but the “haves” control the money and push-back and refusal are on the horizon.

“The future is like a toy at Christmas time; some assembly is always required.”

-The Sages

In the United States rancor will resurface. Like in Europe, the “have-nots” control the votes but the push-backs will come and the intensity of them may startle many as the House refuses to accede to the demands and cries for the sharing of wealth. Polarization will continue and a shift in the population base will bring intense rivalry from one State to the next. I expect fourth quarter numbers to disappoint and the House may ultimately curtail the Fed so that the largesse of the past may be ended and quite severe consequences occur. In the meantime demand outstrips supply and compression will continue and risk assets will continue to appreciate right up until the time when the music stops in Congress. Be ready to turn on a dime and the reaction must be swift but not yet and enjoy the ride as long as it goes on.

The nightmares of the Past and the chaos of the Present are nothing compared to the wild dreams of the Future. Embrace the Future because if you do not it will surely embrace you!